New investor needing advice

General Real Estate Investing
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New investor needing advice

Cliff C.Pro Member
Rental Property Investor · Spring Hill, TN · Member since 2015 · 45 posts · 12 votes

Hello!

I am a new investor and looking for my first deal. I have been looking around on BP for the past couple of months and just joined. This place is AWESOME and I am learning a lot from this forum! I have decided to invest in small multi-families (quadplexes) to get experience with the goal of in 5 years to move to larger multi-family properties. I am in the Nashville area and this market is HOT right now. It is really a seller’s market and I do not believe it is the right time to invest in Nashville. As such, I am looking at surrounding markets that are within ~150 miles of Nashville for my first multi-family property (i.e. Memphis, Huntsville, Birmingham, Louisville, Indianapolis).

My questions are:

Will I make it too difficult on myself having my first property out of town?

I will make a personal visit to the property once every month. Would this be sufficient?

I have been receiving links to websites or memorandums showing gross rents and estimated expenses from the real estate agents. Can these number actually be trusted? How can I verify the rents and expenses they are telling me are honest and accurate?

Once I make an offer and have a quadplex under contract, what is my way out if I look deeper into the property and determine this is not the investment for me?

How difficult is it to sell a quadplex?

What resources do you use to get market data?

Thanks for all of your help!! 

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  • Walker Hinshaw
    Investor · Denver, CO · Member since 2014 · 135 posts · 37 votes
    11y

    Will I make it too difficult on myself having my first property out of town?

    My main worry with buying a property out of town would be getting to know the area well enough to know the good deals from the bad ones. Sometimes just a couple blocks can make a big difference.

    If you don't want to take care of a property that is further away, just factor in the cost of property management (usually between 7% and 12%) when running your numbers. In fact, I suggest you do this even if you plan on managing the property yourself so if circumstances change you can pay a property manager and still cashflow.

    For another way to look at your first investment if you are willing to house-hack, check out @sco

    I will make a personal visit to the property once every month. Would this be sufficient?

    This should be more than sufficient if you have a decent property manager.

    I have been receiving links to websites or memorandums showing gross rents and estimated expenses from the real estate agents. Can these number actually be trusted? How can I verify the rents and expenses they are telling me are honest and accurate?

    Always verify the numbers for yourself. What websites are they sending you to? Some of the websites I have heard of people using to determine market rents include rentometer.com, rentrange.com, hotpads.com, zillow.com, and craigslist. As far as the expenses, use the BP buy & hold calculator (http://www.biggerpockets.com/buy-and-hold-calculat...) to make sure they are accounting for all of your possible expenses and run the numbers. Look in the forums for estimates of any costs you cannot estimate on your own. You may have to call a few people such as an insurance agent in order to get a true idea of what some of the expenses listed in the calculator will cost you because they are determined on an extremely case by case basis.

    Once I make an offer and have a quadplex under contract, what is my way out if I look deeper into the property and determine this is not the investment for me?

    You walk away and lose any money you put in escrow.

    How difficult is it to sell a quadplex?

    If it is not cashflowing then it could be pretty tough. If it is cashflowing, you will be able to find someone to take it off your hands.

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  • Walker Hinshaw
    Investor · Denver, CO · Member since 2014 · 135 posts · 37 votes
    11y

    For another way to look at your first investment if you are willing to house-hack, check out @Scott Trench's article on the subject. http://www.biggerpockets.com/renewsblog/2015/02/21...

    It may help your confidence (and your experience) to buy your first property like this even if you are not going to cashflow on the deal.

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